Legal experts, policymakers, and representatives from industry and consumer side as well as academia gathered on the 1st of December for an insightful discussion on TPLF organized by EJF in collaboration with the American Chamber of Commerce to the European Union. The event delved into the crucial aspects of effective and fair delivery of justice, proportionality, sensible regulation, oversight, and transparency in the context of TPLF.
The European industry is deeply concerned about the proposed revision of the PLD. EJF and other European organizations have published an Industry Statement stating that the proposed revision, as it stands, could disrupt the balance between consumer protection and business interests, potentially leading to a culture of litigation in Europe. This imbalance would not only affect companies but also consumers: innovations could become too risky, and rising legal cost exposure might result in a cost spiral making products and services more expensive (social inflation).
The proposed changes to the directive may eliminate existing safeguards and create a litigation-friendly environment, increasing the legal risks and complexity for European businesses, especially smaller companies. The primary beneficiaries of these changes would be lawyers and third-party litigation funders, not consumers.
Moreover, there are questions over the expansion of the Directive to cover digital products, shifting the burden of proof, and its disclosure of evidence provisions, all of which pose significant challenges for businesses. We urge European policymakers to reconsider these measures and strike a balance that modernizes product liability without undermining innovation and legal certainty.
Read the full statement here.
In the run-up to the 2024 European elections, the political groups of the European Parliament are developing their electoral manifestos to establish their priorities for the upcoming legislative period. As part of our mission to advancing progressive values and strengthening the civil justice system throughout the European Union, EJF has submitted various policy proposals to be included in their manifestos. These proposals are meant to address the importance of avoiding court congestion by prioritizing alternative dispute resolution methods. They also emphasize the need to regulate private litigation funding to prevent exploitation for profit. Furthermore, they call for enhancements to the EU-wide system for handling cross-border mass claims. Lastly, the proposals highlight the importance of maintaining a balance in liability regulations to encourage innovation while protecting consumers.
By championing these policy proposals, the political groups from the European Parliament could demonstrate their commitment to progressive legal reforms that enhance legal clarity, cross-border coordination, and justice delivery for citizens and stakeholders across the European Union.
Europe is at a cross-roads for product liability rules. Following the proposal on a New Product Liability Directive, EJF and other European organizations urge policymakers, in a joint statement, to consider key issues such as protection against malicious mass-claims and new rules on burden of proof, to ensure a balanced and effective product liability regime that benefits both businesses and consumers. The proposed revision of the PLD, as it stands, would introduce radical changes in the EU legal landscape and it may indeed have unintended consequences for Europe's competitiveness and national justice systems. PLD could signal another move towards a litigation culture in the EU that serves primarily the economic interests of private third-party funders as well as placing an extra burden on already-stretched national court systems and state resources. Let's work together to protect European competitiveness and consumer rights via fair, effective and efficient civil rights systems in the EU.
Read more in our Joint Statement below.
The latest episode of the Claims Insight Podcast by Swiss Re Corporate Solutions addressed the issue of class action lawsuits trends in Europe and the challenges ahead. Hosted by Marc Scheidegger, Chief Claims Officer of Swiss Re Corporate Solutions, this episode tried to answer key questions around the impact of the Representative Action Directive on consumers and businesses and the fast-raising industry of third-party litigation funding, together with Moya Stevenson, Senior Claims Counsel, Casualty, FinPro & Aviation at Swiss Re, and Stefaan Voet, Professor of Law at KU Leuven Centre for Public Law. Moya is, of course, the current Chair of EJF.
The Representative Action Directive, which is currently under transposition at national level, puts in place a new legal system that enforces consumers’ rights collectively while allowing cross-border actions and third-party funding of litigation. The latter, however, creates several legal uncertainties in terms of funders’ role in the claims as well as bringing the risk of conflicts of interests. It is also unclear, according to the two guests, how much third-party funders would be able to earn out of the final compensation allocated by the judge, and how a conflicting situation can be solved in case funders want to accept the settlement offered by a judge and the redress beneficiaries do not. In this new regulatory framework third-party litigation funders and their economic interests will probably become one of the main drivers of collective claims.
To the question of how businesses can lower the risks of collective litigation, the speakers agreed that regulators often do and should play an important role. They should therefore step in to design further measures to reduce harm for consumers, also reducing the need for escalation of disputes into courts. To bring an example, an interesting proposal from the European Commission within the revision of the 2013 ADR Directive would extend the outcome of an ADR case to other claims as well, preventing those others from being brought before court (being the costliest and most time-consuming way of solving disputes).
This expert episode concludes that class action litigations will be for most businesses a novelty, where numerous new players/advisors will be involved besides lawyers, such as funders and insurers. This will result in a more complex litigation procedure that will require new legal strategies and acumen. The main challenge for business will be therefore to ensure that a strategy to respond and resolve disputes is in place, in order to minimize the negative effects on justice.
You can listen to the entire podcast for more insights here.
EJF, along with 26 other European associations, has published a joint business statement on the European Commission’s proposal of the Corporate Sustainable Due Diligence Directive (CSDDD). Corporate Sustainability Due Diligence is progressively becoming a key EU policy that concerns a large portion of the European business community. As such, EJF plans to closely follow the file and act according to our principles and objectives. In this crucial phase of the legislative process, the business community would like to put forward a number of recommendations and concerns to enhance the benefits of the corporate sustainability due diligence proposal.
After 2 long years of pandemic, practitioners and academic experts resume gatherings to find solutions to issues of solving mass disputes fairly and effectively that have the potential to impact European justice. On this occasion, Alternative Dispute Resolution (ADR) took the spotlight.
In November 2022, Dr. Herbert Woopen, Director of Legal Policy of EJF, together with Dr. Lorenz Ködderitzsch, the former long-term Chair of EJF, contributed to the Panel “Feedback and Affecting Behaviour” in the context of ADR and provided views on how to develop the ideal holistic domestic infrastructure for dispute resolution. Whether a consumer is attempting to solve a dispute in court, out of court or with the intervention of a regulator as public authority, the structure of the task to be accomplished is always the same: (i) capture disputes and details as well as potential beneficiaries; (ii) define comparable cases in view of a solution; (iii) clarify applicable rules and legal norms; and (iv) negotiate or impose a solution.
To streamline this process, appropriate IT infrastructure should be set up. Such support for resolution tools could be essentially the same for all three pathways, as a high quantity of cases require digitization. It is against this background that Dr Woopen proposes a functional IT architecture: a single central electronic register that would be fed by consumers themselves, by consumer associations, by European Consumer Centres, by the public entities created by the Consumer Protection Cooperation Regulation for cross-border cases or by sectorial, other and residual ADR entities as sources.
For a deep dive into the present topic, see the full presentation here.
EJF, along with 12 other co-signatories have published our joint business statement supporting the European Parliament Report on Responsible Private Funding of Litigation by MEP Axel Voss.
Third Party Litigation Funding (TPLF) allows private financiers, like investment and hedge funds, to sign confidential deals with lawyers or qualified entities to fund lawsuits and arbitration in exchange for a cut of any settlement or judgment/award. TPLF is an estimated €40 to €80 billion market globally. There are more than 100 litigation funders operating in Europe, yet TPLF is largely unregulated in the EU, unlike other financial and legal commercial activities.
In our letter, EJF, together with organisations such as Airlines for Europe (A4E), BusinessEurope, DigitalEurope, European Banking Federation, InsuranceEurope, MedTech Europe and U.S. Chamber Institute for Legal Reform, explain our concerns with this practice. Although the EU Directive on Representative Actions provided for some rudimentary rules around transparency of funders, these rules will only apply to collective actions brought under this one Directive, and not to any other type of claim or law outside the Directive’s scope, including, in particular, those brought via the claims assignment models being operated in various EU Member States.
We are therefore supportive of the European Parliament’s legislative own-initiative report on responsible private funding of litigation, which calls on the European Commission to propose sensible safeguards for effective oversight of TPLF.
EJF is pleased to share its position paper regarding the legislative own initiative report of MEP Axel Voss on Responsible Private Funding of Litigation. EJF outlined points of crucial importance to achieve an effective and coherent legal architecture that safeguards against potential abuses of TPLF. This is because while collective redress mechanisms and TPLF are meant to have a positive impact for consumers in facilitating the access to justice, there is the risk – if no sufficient safeguards are put in place – that private funders’ interests (especially their interest in commercial profit) may be disconnected from – or even opposed to – consumers’ interests. Concrete examples can be seen in the US or in Australia. In Europe we are seeing an increase in cases.